Question

If a contract has prepayment penalties, they can be found in which real estate contract clause?

A) In the Habendum Clause
B) In the Defeasance Clause
C) In the Prepayment Penalty Clause
D) In the Penalty and Insurance Clause

Answer 1

Prepayment penalties in a real estate contract are detailed in the Prepayment Penalty Clause, which outlines the terms and penalties for early loan payoff.

Step-by-step explanation:

If a real estate contract contains prepayment penalties, these details would most likely be included in the Prepayment Penalty Clause. This clause specifically outlines the terms under which the borrower can pay off the loan before its due date and any penalties that may be incurred as a result. Other clauses generally serve different purposes. For instance, the Habendum Clause typically clarifies the ownership rights that come with the property, the Defeasance Clause deals with the voiding of a deed or contract upon fulfillment of some condition, and the Penalty and Insurance Clause often relates to insurance requirements and penalties for non-compliance rather than prepayment penalties.